- “Movable property shall mean property of every description, except immovable property.”
- Includes standing timber, growing crops, grass, fruits upon, and juice in trees.
- Movable when severed from the land.
- Examples:
- Crops: Usable once harvested, thus considered movable.
- Grass: Generally used as cattle feed, considered movable.
- Timber: Used in construction after being cut from land, considered movable.
- “Moveable property” includes corporeal property except land and things attached to the earth or permanently fastened to anything attached to the earth.
- Can become movable upon severance from the earth.
Immovable Property
- General Understanding:
- Typically includes land and things attached to the earth or permanently fastened to anything attached to the earth.
- Trees bearing fruits when planted in the earth are considered immovable.
Transfer of Property Act
- Focus: Regulates transfer of immovable property by sale, mortgage, lease, gifts, or actionable claims.
- Definition: Does not define movable property.
Important Case Laws Dealing with Movable and Immovable Property
Definition and Issues
- Interpretation Room: Definitions of movable and immovable property have room for interpretation.
- Profit Prying: The right to take something from someone else’s territory.
Landmark Cases
1. Smt. Shantabai v. State of Bombay [1958]:
- Holding: The right to enter the land, cut, and carry away wood for 12 years is a benefit arising from land, thus considered immovable property.
2. Anand Behera v. Province of Orissa [1956]:
- Holding: Profit arising from land is immovable property. The right to walk on the land, draw fish from a lake, and grazing cattle are considered immovable properties as benefits arising from the land.
3. Bamdev v. Manorma [1973]:
- Holding: Equipment embedded in the earth for enjoyment rather than for permanent use does not become immovable property. The temporary cinema equipment was deemed movable property.
4. Duncans Industries Ltd. v. State of UP [2000]:
- Holding: Property is classified based on the owner’s intention. Equipment installed for long-term use, which cannot be removed without significant damage, is considered immovable property.
Concept of Annexation
- Establishment: Property lying on the land by its own weight is movable.
- Significant Damage: If removing an item causes significant damage, it is considered immovable.
- Intention and Timeframe: The degree of annexation is determined by the intention and the period of use.
Judicially Recognized Properties
- Immovable Properties:
- Right to collect rent for immovable property
- Hereditary office
- Right to ferry
- Right of fishery
- Equity of redemption
- Factory
- Building
- Walls
- Interest of mortgage in immovable property
- Movable Properties:
- Government promissory notes
- Royalty
- Right of worship
- Decree of sale of mortgaged property
- Standing timber
- Grass
- Growing crops
Essentials of a Valid Transfer
1. Inter-Vivos Transfer
- Section 5: The transfer must be between living persons. This includes individuals, companies, corporations, or associations.
2. Transferable Property
- Section 6: Lists invalid transfers.
- Heir-Apparent Chance: Cannot transfer the possibility of inheriting an estate.
- Right of Re-Entry: Cannot transfer a right of re-entry for breach of a condition subsequent except to the property owner.
- Easements: Cannot be transferred separately from the dominant heritage.
- Personal Enjoyment: Interest restricted to personal use cannot be transferred.
- Future Maintenance: Right to future maintenance cannot be transferred.
- Right to Sue: Cannot transfer a mere right to sue.
- Public Office and Salary: Cannot transfer a public office or the salary of a public officer.
- Pensions: Military, naval, air force, civil, and political pensions cannot be transferred.
- Opposed Transfers: No transfer opposed to the nature of the interest, for unlawful objects or consideration (as per Section 23 of the Indian Contract Act, 1872), or to legally disqualified persons.
- Exceptions: Certain tenants, farmers in default of revenue payment, and lessees under court management cannot assign their interest.
3. Competent Persons to Transfer
- Section 7: Persons competent to contract under Section 11 of the Indian Contract Act can transfer property. They must be of sound mind, not disqualified (e.g., insolvent, alien enemy).
Key Cases
1. Sadiq Ali Khan vs. Jai Kishore, 1928
- Privy Council Ruling: A deed executed by a minor is null and void. The principle of estoppel does not apply to minors. While minors cannot transfer property, transfers to minors are valid.
2. Amina Bibi vs. Saiyid Yousuf, 1922
- Allahabad High Court Ruling: A contract made by a lunatic is void under Section 11 of the Indian Contract Act. Consequently, any transfer of property by a lunatic is void.
Transfer in Perpetuity
When property is transferred in a manner that makes it inalienable for an indefinite period, it is known as a transfer in perpetuity. This can occur in two ways:
- By taking away the transferee’s power to transfer.
- By creating future improbable interests.
Section 10 of the Transfer of Property Act states that any condition restricting the transferee’s power to transfer is void.
Rule Against Perpetuity
The rule against perpetuity prevents the property from being tied up indefinitely. This rule is codified in Section 14 of the Transfer of Property Act.
Period of the Rule
- Lives in Being: The interest must vest within 21 years after the death of the person.
- Plus Twenty-One Years: This is an additional period, known as the period in gross.
- Periods of Gestation: Includes gestation periods at the beginning and end of the “lives in being” and at the end of the 21-year period.
Object of the Rule
The rule aims to ensure the free circulation of property by:
- Preventing property from being tied up indefinitely.
- Promoting trade and commerce.
- Enhancing property utilization.
- Protecting the owner’s interest, allowing property disposal in emergencies.
Principle Behind the Rule
The rule is based on public policy. Without it, property would become static and unusable, negatively affecting the economy.
Conditions Necessary for the Rule
- Alienation of property.
- Transfer benefits an unborn child, giving them absolute interest.
- Transfer interest to the beneficiary is preceded by the life interest of living persons.
- The unborn beneficiary must be born before the death of the last preceding living person.
- Conferring of interest to the beneficiary can be postponed only to the life of the living person plus the minority of the beneficiary, not beyond that.
Exceptions to the Rule Against Perpetuity
- Benefit of Public: Property transferred for public benefit, such as advancing religion, knowledge, commerce, health, safety, etc.
- Personal Agreement: Personal agreements that do not create any interest in property are exempt from the rule.
Relevant Cases
1. Supreme Court Observation:
- The rule against perpetuity applies to contracts creating rights in property.
- Rights under a contract are assignable.
- The rule restricts the creation of future unconditional interests in property.
- The rule does not apply to an agreement of pre-emption without a time limit.
2. Bombay High Court Case:
- Declared void a gift of movable property to a son with a gift of shares to the son’s grandson upon reaching the age of 21.
Conclusion
The rule against perpetuity limits the period for certain restrictions on the use and transfer of property. It ensures that property interests cannot be postponed beyond the lifetime of any living person at the date of the transfer. While the rule has exceptions, it generally aims to prevent the destruction of the liberty of alienation.
Vested and Contingent Interest
The Transfer of Property Act, 1882, addresses vested and contingent interests, which are types of property interests based on the certainty or uncertainty of events.
Vested Interest
Section 19 of the Transfer of Property Act, 1882, defines vested interest. It is created when an interest in property is granted in favor of a person upon the occurrence of a specified certain event, even if the time is not specified. The person with the vested interest does not immediately possess the property but is expected to receive it when the specified event happens.
Example: A promises to transfer his property to B when B attains the age of 21. B has a vested interest in A’s property until he turns 21 and takes possession. If B dies at 20, the vested interest passes to B’s legal heirs, who will receive the property at the specified time.
Important Aspects of Vested Interest:
- Interest Should Be Vested: The interest must be created in favor of a person upon a condition of a specified certain event, even if no time is specified.
- Right to Enjoy Property is Postponed: The person with a vested interest does not immediately gain possession of the property and cannot enjoy it until the specified event occurs. If the person is a minor, they are entitled to the vested interest upon attaining majority.
Example: X agrees to transfer property ‘O’ to Y and instructs Y’s guardian Z to give the property to Y when Y turns 20. Y gets a vested interest upon reaching the age of majority (18), but can only possess and enjoy the property when he turns 20.
Contingent Interest
Contingent interest, as defined by the Transfer of Property Act, is created when an interest in property is granted upon the occurrence of an uncertain event. If the specified event does not happen, the interest fails.
Example: A promises to transfer his property to B if B marries C. B’s interest in A’s property is contingent upon B marrying C. If B does not marry C, B’s interest fails, and he does not get the property.
Key Differences Between Vested and Contingent Interest
1. Certainty of Event:
- Vested Interest: Based on the occurrence of a certain event.
- Contingent Interest: Based on the occurrence of an uncertain event.
2. Possession:
- Vested Interest: The beneficiary expects to receive possession upon the event’s occurrence.
- Contingent Interest: The beneficiary only receives possession if the uncertain event occurs.
3. Transferability:
- Vested Interest: Transferable to legal heirs if the beneficiary dies before the event.
- Contingent Interest: Does not transfer to heirs if the event does not occur.
Legal Implications
Understanding the nature of vested and contingent interests is crucial for legal professionals dealing with property law, as it affects inheritance rights, property disputes, and the execution of wills and trusts. The specifics of these interests help determine how property is distributed and who has the right to possess it under various circumstances.
Doctrine of Lis Pendens: Definition and Concept
- Lis Pendens: Latin term meaning “pending litigation.”
- It is a legal principle concerning immovable property under Section 52 of the Transfer of Property Act, 1882 in India.
- This doctrine ensures that the subject matter of a lawsuit cannot be transferred to a third party during the litigation.
Purpose
- To protect the interests of the parties involved in a pending lawsuit concerning immovable property.
- To prevent the transfer of property rights that could affect the outcome of the litigation.
Legal Framework: Section 52 of the Transfer of Property Act, 1882
- Text: “During the pendency of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.”
- Key Points:
- Property transfers are restricted during the pendency of a lawsuit.
- The court must authorize any transfer of property during the litigation.
- The lawsuit must be genuine and not collusive.
Essential Conditions for Application
- Pending Suit: There must be an ongoing lawsuit or legal proceeding.
- Jurisdiction: The suit must be within the jurisdiction of a competent court.
- Direct Involvement: The lawsuit must directly involve rights to immovable property.
- Non-collusive: The lawsuit must not be collusive.
- Party to Suit: The transfer must involve a party to the suit.
- Impact on Rights: The transfer must affect the rights of other parties involved in the litigation.
Judicial Interpretations
- Dev Raj Dogra v. Gyan Chand Jain: Essential elements for the doctrine’s application were outlined.
- Balwant Singh v. Buta Ram: Affirmed that transfers during a pending lawsuit require court permission and are subject to the court’s ruling.
Exceptions
- Court’s Consent: Transfers authorized by the court are exceptions to the doctrine.
- Examples:
- Vinod Seth v. Devinder Bajaj: The court allowed property transfer during litigation with conditions, such as a security deposit.
Effects of Doctrine
- Voidable Transfers: Transfers during a pending suit are not void but voidable. They are subject to the litigation’s outcome and the court’s final judgment.
- Binding Effect: Any party acquiring property during pending litigation is bound by the court’s judgment, even if they were not aware of the ongoing lawsuit.
Key Cases
- Faiyaz Hussain v. Munshi Prag Narrain: Emphasized the necessity for final adjudication to avoid endless litigation.
- Iqbal Singh v. Mahendar Singh: Established that arbitration proceedings make the property sub-judice.
- Swaran Singh v. Arjun Singh and Ors.: Applied the doctrine to arbitral proceedings enforceable in court.
- Simla Banking Industrial Co. Ltd. v. Firm Luddar Mal, Tek Chand: Clarified that lis pendens binds buyers to the litigation’s outcome.
- Aswathnarayana Setty v. State of Karnataka & Ors.: The principle is based on justice, equity, and good conscience.
- Hardev Singh v. Gurmail Singh: Section 52 does not render transfers void but makes parties bound by the judgment.
- Gouri Datt Maharaj v. Sheikh Sukur Mohammed & Ors.: The section aims to maintain the status quo during litigation.
Conclusion
- The Doctrine of Lis Pendens is crucial in ensuring the fairness and integrity of legal proceedings involving immovable property.
- It safeguards against undermining the litigation process by preventing unauthorized property transfers.
Doctrine of Election: Definition and Concept
- Election: Choosing between two alternative rights.
- A person endowed with two rights under an instrument must choose one if one right is preferable to the other.
- Section 35 of the Transfer of Property Act, 1882: Deals with the Doctrine of Election.
- This doctrine also includes Sections 180-190 of the Indian Succession Act, 1925.
Theme behind Section 35
- Allegans contraria non est audiendus: He is not to be heard who alleges things contradictory to each other.
Legal Framework: Section 35 of the Transfer of Property Act, 1882
- Text: When a person professes to transfer property they have no right to transfer and confers any benefit on the property’s owner, the owner must elect either to confirm or dissent from the transfer. If dissenting, the owner must relinquish the benefit conferred.
- The rule applies whether the transferor believes they own the property or not.
- Persons taking indirect benefits under a transaction do not need to elect.
- A person benefiting in one capacity can dissent in another.
Understanding the Doctrine of Election
- Universal Application: Applicable to Hindus, Muslims, Christians.
- Principle: One must accept or reject an entire instrument or transaction.
Essential Conditions for Application
From Dhanpati v. Devi Prasad and others (1970):
- A person with no right to transfer property does so.
- The transferor confers a benefit on the property’s owner as part of the same transaction.
- The owner must choose to confirm or dissent from the transfer.
Effect of Election Against the Transfer
- Dissent:
- The owner must forgo the benefit.
- The benefit reverts to the transferor.
Exceptions to the Doctrine of Election
- If a benefit is conferred in lieu of the property, the owner is not bound to relinquish other benefits from the same transaction.
- Acceptance of the benefit implies election to confirm the transfer if the owner is aware of their duties and the circumstances.
- Knowledge is assumed if the benefit is enjoyed for more than two years without dissent.
- The transferor may require the owner to elect if no choice is made within a year.
- For minors, the election period is postponed until majority unless represented by a guardian.
Modes of Election
- Direct Election: Simply communicate the choice.
- Indirect Election: Acceptance of the benefit subject to:
- Knowledge of the responsibility to elect.
- Knowledge of circumstances influencing prudent judgment.
Differences Between English Law and Indian Law
- English Law: Based on compensation; the original owner retains property and benefits, compensating the donee for losses.
- Indian Law: Based on forfeiture; the donee forfeits the benefit if the original owner does not confirm the transfer.
Compensation
- Compensation is the approximate value of the property attempted to be transferred, evaluated at the time the instrument comes into force, not at the time of election.
Conclusion
- Section 35: Explains the Doctrine of Election with essential conditions and judicial interpretations.
- Foundation: A person taking a benefit under an instrument must also bear the burden. One cannot benefit under and against the same instrument.
Section 53 of the Transfer of Property Act, 1882: Understanding Fraudulent Transfers
Definition and Context
- Fraudulent Transfer: A transfer made to defeat or delay creditors of the transferor or without consideration with the intent to defraud subsequent transferees.
- Section 53: Deals with voidable transfers in such cases.
Provisions of Section 53
1. Voidability: Transfers made to defeat or delay creditors are voidable at the option of the defeated or delayed creditor.
- Does not affect rights of a transferee in good faith and for consideration.
- Does not override insolvency laws.
2. Voidability for Fraudulent Transfers: Transfers without consideration to defraud subsequent transferees are also voidable at the option of such transferees.
Conclusion
Section 53 of the Transfer of Property Act addresses fraudulent transfers with the aim of protecting creditors’ interests. It outlines conditions for voidable transfers and provides legal recourse for creditors affected by such transfers. Judicial interpretations have further clarified the scope and applicability of this section in cases of fraudulent transfers.
Sale
Section 54 of the Transfer of Property Act, 1882, defines the sale of immovable property as a transfer of ownership in exchange for a price paid, promised, or part-paid and part-promised.
- Sale Defined: The section defines a sale as a transfer of ownership of tangible immovable property worth Rs. 100 or more, or intangible property, through a registered instrument. For property valued less than Rs. 100, the transfer can be by a registered instrument or delivery.
- Requirements for Sale Deed: A valid sale deed must be executed in writing, attested, and registered for tangible immovable property worth Rs. 100 or more.
- Contract of Sale: This is distinct from a sale deed and doesn’t require registration. It gives the right to obtain a sale deed but doesn’t create a charge or interest in the property.
- Equities in Contract of Sale: Even without registration, equities may arise in favor of the transferee. For example, if a subsequent transferee with notice of an earlier agreement holds the property, they hold it in trust for the prior agreement holder.
- Protection of Possession: In cases where possession is given under a contract of sale, the possessor may protect their possession against third parties, subject to certain conditions like those mentioned in Section 53A.
- Mortgage Defined: The definition of mortgage as per the Transfer of Property Act is a conveyance of land or assignment of chattels as security for debt or other obligations.
- Statutory Provisions: The entire law of mortgage in India, including contribution arising from mortgage transactions, is statutory and governed by the Transfer of Property Act along with the Code of Civil Procedure.
The essential elements of the sale of immovable property are:
- Parties: There must be a competent seller and buyer who are capable of entering into a contract under the Indian Contract Act. The seller should have the authority to transfer the property.
- Subject Matter: The sale pertains only to immovable property, which can be tangible (e.g., land, house) or intangible (e.g., right of way, fishery).
- Transfer of Ownership: There must be a clear transfer of ownership from the seller to the buyer.
- Price: The contract must involve a price, which is essential for the sale. The price can be paid in various forms, including lump sum or installments, as agreed upon by the parties.
- Consideration: The consideration for the sale can include various aspects like a compromise, decretal amount, advances, agreements to protect and defend the property, or family settlements.
- Payment of Consideration: Normally, the consideration is paid simultaneously with the execution of the sale deed. However, parties can agree to pay it at different times, such as during registration or afterwards.
- Genuine Payment: The payment or promise of payment must be genuine. If the buyer tries to evade payment using dubious means, the sale may not take effect.
Section 55 of the Transfer of Property Act, 1882 delineates the rights and liabilities of both buyers and sellers in the context of immovable property transactions.
Duties of Seller:
- Disclosure of Defects: The seller must disclose any material defect in the property or title to the property.
- Production of Documents: The seller is required to provide all documents of title for examination.
- Answering Questions: The seller must answer relevant questions regarding the property or its title.
- Execution of Conveyance: After receiving the sale price, the seller must execute the sale deed.
- Payment of Outgoings: The seller is responsible for paying public charges, taxes, and rent due on the property before the sale.
- Lis Pendens: The seller should inform the buyer of any pending legal proceedings related to the property.
- Delivery of Possession: The seller must deliver possession of the property at the time of sale execution.
Rights of Seller:
- Right to Rent and Profit: The seller has the right to receive rents and profits from the property until ownership transfers to the buyer.
- Right to Interest on Unpaid Money: If the buyer takes possession before paying the full purchase price, the seller has a right to charge interest on the unpaid amount.
Liabilities of Seller:
- Liability to Disclose Defects: The seller must reveal any material defects that the buyer is not aware of and could not have discovered with ordinary care.
- Liability to Submit Documents: The seller must provide all documents of title upon the buyer’s request.
- Liability to Answer Questions: The seller must answer relevant questions about the property or its title.
- Liability to Execute Conveyance: Upon receiving the payment, the seller must execute a proper conveyance of the property.
- Liability to Protect Documents: The seller is responsible for taking care of the property and all related documents until delivery.
- Liability to Deliver Possession: The seller must provide possession of the property as agreed upon.
Rights of Buyer:
- Right to Benefits and Rents: Upon ownership transfer, the buyer has the right to benefit from any improvements or increased value of the property, as well as to receive rents and profits.
- Right to Interest: Unless the buyer improperly declines property delivery, they have a right to charge the property for any purchase-money paid in anticipation of delivery, along with interest on that amount.
Liabilities of Buyer:
- Disclosure of Facts: The buyer must disclose to the seller any fact about the seller’s interest in the property that materially increases its value.
- Payment of Purchase Money: The buyer is liable to pay or tender the purchase-money at the agreed time and place. If the property is sold free from encumbrances, the buyer can retain the amount for encumbrances and pay it to the rightful persons.
- Bearing Damages: Once ownership transfers to the buyer, they bear any loss due to property destruction, injury, or decrease in value not caused by the seller.
- Payment of Due Amounts: The buyer is responsible for paying all public charges, rent, principal money on encumbrances, and interest accruing afterward after ownership transfer.
It’s crucial for the buyer’s advocate to thoroughly investigate the property’s title, tracing it for 30 years, checking for encumbrances, defects, ownership records, acquisition notices, and consider stamp duty and registration for immovable property valued at ₹100 or more.
Mortgage of Immovable Property
The term “mortgage” originates from the French language, meaning a “death contract.” This term symbolizes that the mortgage, akin to a pledge or guarantee, terminates only when the loan is repaid, the obligation is fulfilled, or the borrower either takes over or sells the collateral (mortgaged property) through foreclosure.
According to Bouvier’s Law Dictionary (8th Edition), a mortgage is a conditional conveyance of land designed as security for payment of money, fulfillment of a contract, or performance of an act, becoming void upon such payment, fulfillment, or performance. It acts as security for the loan amount, benefiting banks, financial institutions, and individuals seeking loans for various purposes.
Black’s Law Dictionary (7th Edition) defines “mortgage” as a conveyance of property title given as security for debt payment or duty performance, becoming void upon fulfilling stipulated terms. Other definitions include it as a lien against property, an instrument specifying transaction terms, the loan itself, the mortgagee’s rights, and any real-property security transaction.
Mortgage of Property in India
The Transfer of Property Act, 1882, modeled on English mortgage law, underwent changes with the Law of Property Act, 1925. In England, mortgage transformed into a lease, and discharge of mortgage money triggered a cessation of the lease term. Section 58 of the Transfer of Property Act, 1882, provides a comprehensive definition of mortgage in India.
In the case of Kottayya v Annapumamma (1945), a debtor granted the creditor a right to occupy and enjoy land for 20 years due to inability to repay the debt, deemed a lease rather than a mortgage. Lord Macnaghten in South African Territories Ltd v Wallington (1898) emphasized the unenforceability of specific performance of a contract to lend money, solidifying a fundamental legal principle.
Definitions and Types of Mortgages Under Section 58 of the Transfer of Property Act, 1882
Section 58 of the Transfer of Property Act, 1882, provides comprehensive definitions and classifications of mortgages. Let’s explore these definitions and types:
1. Definition of Mortgage (Section 58(a)):
- A mortgage is the transfer of an interest in specific immovable property to secure the payment of money advanced as a loan, an existing or future debt, or the performance of an engagement leading to a pecuniary liability.
- The transferor is the mortgagor, the transferee is the mortgagee, the money and interest secured are mortgage-money, and the instrument affecting the transfer is the mortgage-deed.
2. Simple Mortgage (Section 58(b)):
- In a simple mortgage, the mortgagor does not deliver possession of the property but binds himself personally to repay the mortgage-money.
- The mortgagee has the right to sell the property to recover the mortgage-money in case of default, either by seeking court permission for sale or by filing a suit for recovery.
3. Mortgage by Conditional Sale (Section 58(c)):
- Here, the mortgagor seemingly sells the property to the mortgagee with conditions:
- The sale becomes void upon payment of the mortgage-money.
- The mortgagee retransfers the property on payment.
- The sale becomes absolute if the mortgagor defaults.
4. Usufructuary Mortgage (Section 58(d)):
- In an usufructuary mortgage, the mortgagor delivers possession of the property to the mortgagee, who retains possession until the mortgage-money is paid.
- The mortgagee can retain rents and profits to offset interest or mortgage-money.
5. English Mortgage (Section 58(e)):
- The mortgagor promises to repay the mortgage-money by a specified date, transferring the property to the mortgagee absolutely but subject to retransfer upon payment.
- Three essential conditions define an English mortgage: repayment commitment, absolute transfer, and proviso for retransfer.
6. Anomalous Mortgage (Section 58(g)):
- Any mortgage not falling under the above categories is termed an anomalous mortgage.
- The intention of the parties is crucial in interpreting terms and provisions of an anomalous mortgage.
7. Mortgage by Deposit of Title Deeds (Section 58(h)):
- In certain specified towns, delivering title deeds to a creditor as security constitutes a mortgage by deposit of title deeds.
- The essential elements include a debt, deposit in notified towns, and the intention to create security.
The essentials of a mortgage of property are crucial aspects that define the validity and nature of such transactions. Let’s delve into these essentials:
1. Transfer of Interest:
- A mortgage involves the transfer of an interest in specific immovable property from the mortgagor to the mortgagee.
- The mortgagor, as the property owner, relinquishes a portion of their interest to the mortgagee to secure a loan.
- This transfer reduces the mortgagor’s ownership temporarily, as the mortgagee gains rights to recover the principal and interest from the property in case of default.
2. Specific Immovable Property:
- The property being mortgaged must be clearly and distinctly mentioned in the mortgage deed.
- Vague descriptions like “all of my property” are not sufficient for a valid mortgage.
- Specific identification of the property allows for a decree by the court to sell that particular property to recover the loan in case of default.
3. Purpose of Securing a Loan:
- The primary purpose of a mortgage is to secure the payment of a loan or the performance of an obligation leading to a pecuniary liability.
- It can be used to obtain a loan or to secure the repayment of an existing loan.
- The mortgagor becomes a debtor, and the mortgagee assumes the role of a creditor in this debtor-creditor relationship.
For example, if A mortgages their land to B to secure a loan of a certain amount, the mortgage deed must clearly state the land being mortgaged, the purpose of securing the loan, and the terms of repayment. This clarity ensures the validity and enforceability of the mortgage agreement, protecting the rights of both parties involved.
Section 59 of the Transfer of Property Act, 1882, outlines the requirements for effecting mortgages based on the amount of principal money involved:
1. Principal Money of Rs. 100 or More:
- A mortgage, except a mortgage by deposit of title deeds, must be executed through a registered instrument.
- The instrument should be signed by the mortgagor and attested by at least two witnesses.
2. Principal Money Less Than Rs. 100:
- If the principal money secured is less than Rs. 100, a mortgage can be effected in two ways: a. Through a registered instrument as described above, or b. By delivery of the property, except in the case of a simple mortgage.
The amendment in 1929 added the clause “other than a mortgage by deposit of title deeds,” indicating that such mortgages do not require a registered instrument under this section. Therefore, a mortgage by deposit of title deeds falls outside the scope of Section 59, and no registered instrument is needed for its validity.
It’s crucial to note that the section considers only the principal money secured, excluding interest from the calculation of the amount secured. Additionally, a mortgage is not considered complete and enforceable until it is registered, highlighting the importance of registration in mortgage transactions under this Act.
Gift
Section 122 of the Transfer of Property Act, 1882, provides a concise yet comprehensive definition of a gift. Here’s a breakdown of the key elements outlined in this section:
1. Transfer: A gift involves the transfer of certain existing property. This property can be either movable or immovable.
2. Voluntary: The transfer of property must be voluntary, meaning it is done willingly and without any coercion or undue influence.
3. Without Consideration: Unlike a sale or exchange, a gift does not involve any consideration or payment from the donee to the donor. It is a gratuitous transfer.
4. Parties Involved: There are two parties involved in a gift transaction:
- Donor: The person who voluntarily transfers the property is known as the donor.
- Donee: The person who receives the property as a gift is known as the donee.
5. Acceptance: The gift must be accepted by the donee or someone on behalf of the donee. Acceptance signifies the donee’s willingness to receive the gift.
Eligibility for making a gift
- Competence to Contract: Any person who is competent to contract can make a gift. This includes individuals, companies, associations, or bodies of individuals. Competence to contract generally means being of sound mind, not a minor, and not disqualified by law from entering into contracts.
- Oral or Written Transfer: A gift can be made orally unless specific laws require the transfer to be in writing. However, it’s generally advisable to have a written record for clarity and legal validity.
- Assistance via Power of Attorney: In cases where a person is physically unable to sign a contract but is mentally competent, a lawyer or someone authorized through a power of attorney can sign the contract on their behalf.
- Other Relevant Legislation: Apart from the Transfer of Property Act, there are other laws related to property rights and transfers, such as the Trusts Act, Specific Relief Act, and Easements Act, among others. These laws may intersect with the provisions of the Transfer of Property Act in certain situations.
- Types of Gifts: The Act distinguishes between different types of gifts, including inter vivos gifts (gifts between living persons) and gifts mortis causa (gifts in contemplation of death). Only inter vivos or absolute gifts fall under the purview of the Transfer of Property Act.
- Essential Ingredients of a Gift: For a gift to be valid under the Act, it must meet certain criteria, including lack of consideration (no payment involved), presence of a donor and a donee, clarity about the subject matter of the gift, donative intention (intent to gift), actual delivery or transfer of the gift, and acceptance by the donee.
- Gift of Tangible Property: The Act specifically covers the transfer of tangible property. Intangible assets or securities may not fall under the provisions of this Act.
- Effecting the Transfer: The Act specifies that for immovable property, the gift must be made through a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. For movable property, the transfer can be through a registered instrument or by delivery.
Lease
In Section 105 of the Transfer of Property Act, the term “lease” is defined as a transfer of immovable property for a specified period, agreed upon by the parties involved, in exchange for consideration. This definition encompasses several key elements of a lease agreement:
- Transfer of Immovable Property: A lease involves the transfer of a property interest in immovable property (such as land, buildings, etc.) from the lessor (owner) to the lessee (tenant) for a defined period.
- Specified Period: The lease agreement must specify a particular duration for which the property is transferred to the lessee. This could be for a fixed term (e.g., 1 year, 5 years) or on a periodic basis (e.g., month-to-month).
- Accepted by Parties: Both the lessor and lessee must agree to the terms of the lease agreement. This agreement is usually documented in a lease contract or agreement signed by both parties.
- Consideration: In exchange for the right to possess and use the property, the lessee typically provides consideration to the lessor. This consideration could be in the form of rent payments, services, or any other mutually agreed-upon benefit.
- Rights and Obligations: The lease agreement outlines the rights and obligations of both parties during the lease period. This includes the use of the property by the lessee, maintenance responsibilities, payment of rent, and conditions for renewal or termination of the lease.
- Legal Recognition: A lease agreement under Section 105 of the Transfer of Property Act is legally recognized, providing rights and protections to both the lessor and lessee as per the terms agreed upon.
Essential Elements of a Lease:
- Parties Involved (Lessor and Lessee): A lease involves two parties—the lessor (property owner) and the lessee (tenant). Both parties must be competent to contract, and the agreement is based on their mutual consent.
- Demise (Right to Enjoy Immovable Property): The essence of a lease is the transfer of a limited estate, i.e., the right to enjoy the property (demise), from the lessor to the lessee. This right forms the subject matter of the lease.
- Duration of Lease (Term): The lease specifies the period for which the property is transferred to the lessee. This term can be any length, from short-term leases to long-term or even perpetual leases, as long as it is mentioned in the lease deed.
- Consideration (Premium or Rent): Consideration in a lease can be in the form of a premium (paid at once) or rent (paid periodically). This consideration is typically agreed upon by the parties and forms part of the lease agreement.
Termination of Lease (Determination):
- Lapse of Time: When the specified period of the lease ends, the lease is automatically terminated. The lease duration defines when the lease ends unless renewed or extended.
- Happening of Specified Event: A lease may be conditional on the occurrence of a specific event. If that event happens, the lease terminates as per the agreed conditions.
- Termination of Lessor’s Interest: If the lessor’s interest in the property ends or is terminated, the lease also ends simultaneously.
- Merger: If the interests of the lessor and lessee merge, such as the lessee acquiring the property, the lease may terminate due to the principle that one cannot be both landlord and tenant of the same property.
- Express Surrender: If the lessee voluntarily surrenders the lease before its term, the lease terminates. This surrender can be explicit or implied.
- Implied Surrender: Surrender can also occur by operation of law, such as when a new lease is created or through relinquishment of possession.
- Forfeiture: The lease can be forfeited if the lessee breaches express conditions, denies the landlord’s title, or becomes insolvent, depending on the terms of the lease agreement.
Rights of Lessor:
- Duty to Disclose Latent Material Defect: The lessor must disclose any hidden material defects in the property to the lessee.
- Duty to Give Possession: The lessor is responsible for delivering possession of the property to the lessee so that they can use and enjoy it.
- Covenant for Quiet Enjoyment: The lessor implicitly guarantees the lessee’s peaceful and undisturbed enjoyment of the property during the lease term.
Liabilities of Lessor:
- Duty to Disclose Facts: Just as the lessor must disclose defects, the lessee is bound to disclose any facts that increase the property’s value.
- Duty to Pay Rent: The lessee must pay the rent or premium as per the lease agreement.
- Duty to Maintain Property: The lessee is responsible for maintaining the property in good condition during the lease term.
- Duty to Give Notice of Encroachment: If the lessee notices any encroachment on the property, they must inform the lessor.
- Duty to Use Property Reasonably: The lessee must use the property reasonably, similar to how a prudent person would use their own property.
- Duty Not to Erect Permanent Structures: Without the lessor’s consent, the lessee cannot build permanent structures on the leased property.
- Duty to Restore Possession: At the end of the lease term, the lessee must return possession of the property to the lessor.
Rights of Lessee:
- Right to Accretions: The lessee has the right to any additions or accretions made to the property during the lease term.
- Right to Avoid Lease on Destruction: If the property becomes substantially unfit for use during the lease term due to uncontrollable events, the lessee can terminate the lease.
- Right to Deduct Cost of Repairs: If agreed upon, the lessee may deduct repair costs from the rent.
- Right to Remove Fixtures: After the lease ends, the lessee can remove fixtures they installed.
- Right to Remove Crops: The lessee can harvest and remove crops they planted during the lease.
- Right to Assign Interest: The lessee can transfer their right to use and enjoy the property to another person, unless prohibited by the lessor.
